Editor's Blog

Why hotels should partner with event professionals to solve reducing occupancy
Thu 17 Jan, 2019 at 12:00 am

Attracting MICE business is being considered a viable option for the hotel industry in India as the hotel room inventory expands and weekend occupancies dip. Cushman & Wakefield reported that the Indian hospitality sector will add 52,000 new hotel rooms by 2024. This will lead to a rise of over 65 per cent in total hotel rooms. The National Capital Region (Delhi, Gurgaon, NOIDA) alone is expected to contribute around one third of the total expected hotel rooms supply during the period.

Investors in the country have aggressively endeavoured to create wealth by building hotels which has resulted in the present oversupply. India’s city hotels have touched record average room rates and occupancy rates in the last few years and then the slide began. The utter lack of foresight in planning for the increase in inventory compounded with a slowing economy has led to this debacle. Indian city hotels continue to disregard opportunities to create new markets for their properties.

Most major Indian hotels, other than those in Delhi, have lost the leisure market and are now trying to recapture the MICE segment, which has been successfully lured by Bangkok, Colombo and Kuala Lumpur. In comparison to occupancies from Monday to Wednesday, weekend business in hotels fluctuates wildly. It would be interesting to see the hotels provide their ‘variations in occupancies’ figures as eagerly as they flaunt their averages room rates.

The positives from a spurt in rates in the early part of the decade have resulted in the mushrooming of alternative accommodation like serviced apartments, guest houses and homestays. Some serviced apartments offer excellent value for money and have given three-star and four-star properties a worrying challenge. Companies are also creating their own in-house accommodation options.

Hoteliers should take a cue from markets such as Bangkok, Singapore, Dubai and Kuala Lumpur, where it pays to create a larger source market base and use sounder yield management techniques. It is not a mystery that Indian cities at most times are down by 60-70 per cent from Thursday to Sunday, culminating in over 200,000 unsold room nights. There has been virtually no effort being made by any of the major hotel associations to help hotels tie up with tourism boards, deal with major MICE networks or even travel companies to help create a transparent room rate mechanism. This should be combined with a sound promotional strategy that would help generate business from varied markets such as MICE or leisure.

In the changing hotel ownership dynamics from traditional hotel owners and operators to the new real estate developers, myopia has set in with regard to hotel business development. As more and more hotel builders go in for multi-use models, creating MICE infrastructure will add immense value to their bottom lines.

Apart from the corporate events, Indian hotels across sectors have a large portion of revenues arising from food and beverage. Irrespective of the size of the hotel or its star category, it would help if an event venue is incorporated, especially in India. Some European hotel brands, which do not have MICE as part of the standard design plan, are now customising to take on the Indian desire to celebrate and host events. It does not make so much difference to add an event venue, even if you do not wish to manage it on your own, since management can be outsourced.

Lately, there has been a concerted effort by leading hotel brands such as Marriott, ITC Hotels, Hilton and the Taj to create separate marketing teams to reach out to the MICE segment. Marketing MICE requires different skill sets that do not necessarily align with that of the revenue managers. Hotels should create a business model, where event managers, associations and professional conference organizers (PCOs) are partnered with and considered as part of their distribution strategy.

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